LEE YUN SAU v. D. H. SHUTTLECOCKS LTD.

1991 No. A1459

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

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J U D G M E N T

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1. I have decided to grant the Plaintiff unconditional leave to defend the Defendant's counterclaim. Since the counterclaim will be going to trial unless it is compromised in the meantime, the less I say about the merits of the counterclaim the better, though I must, of course, explain why I think that the Plaintiff's defence to the counterclaim has an arguable chance of success.

2. The Defendant's counterclaim seeks possession of the two suit properties and mesne profits. The Plaintiff's defence is that the Defendant has not acquired title to the properties. That is because the Plaintiff himself claims to be the beneficial owner of them. The initial difficulty for the Plaintiff is that the agreements written in Chinese on which he primarily relies, and by which he claims to have acquired the properties in the first place, were not registered, whereas the deeds of assignment on which the Defendant relies, and by which it claims to have acquired the properties, were registered. Mr. Andrew Cheung for the Plaintiff realistically accepts, therefore, that the effect of section 3 of the Land Registration Ordinance (Cap.128) (subject to a point which he takes about valuable consideration) is to prevent the Plaintiff from relying on the agreements in Chinese to establish the Plaintiff's continuing interest in the properties.

3. However, a proper investigation of the facts at the trial of the action may show that the Plaintiff has acquired rights in the two properties by the operation of the doctrine of proprietary estoppel. The Plaintiff asserts that, in the years after the agreements in Chinese were signed, and in the belief that he was the beneficial owner of the properties, he spent about $1.75m. building two low-rise houses on the properties. There is some evidence that the registered owners of the properties, Li Wai Man and Li Chung Hi ("the vendors"), who had purported to sell the properties to the Plaintiff in the first place, knew what the Plaintiff was doing, and that they therefore acquiesced in, or even encouraged, the "improvements" which the Plaintiff was making and which must have significantly increased the value of the properties.

4. The fact of the matter is that I cannot rule out the possibility that the evidence at trial will be sufficient to found a proprietary estoppel, and that the vendors will be precluded from denying the existence of the Plaintiff's interest in the properties. That estoppel would operate against the Defendant, because where the circumstances are such as to give rise to the estoppel, the estoppel is equally available against the registered owners and any third parties who claim to have subsequently obtained title to the land from the registered owners. It is arguable that, being first in time and non-registerable, such interest in the properties which the Plaintiff may have acquired by the operation of the doctrine of proprietary estoppel would take priority over the Defendant's interest based on the subsequent deeds of assignment.

5. Even if all this is correct, though, the Defendant's case is that such interest which the Plaintiff had in the properties did not survive the assignment of the properties by the vendors to the Defendant, because it is said that the Plaintiff agreed to the assignment of the properties to the Defendant in order to repay the debts which he owed to the Managing Director of the Defendant, who is its majority shareholder. I do not think that the Defendant can rely on that allegation to obtain summary judgment on its counterclaim. The facts upon which the Defendant relies are disputed, and the nature of the dispute is not one which I could confidently resolve on the affirmations. I suspect that the judge at trial may be a little sceptical about the explanation given by the Plaintiff in his 4th affirmation as to how he came to affirm para. 13 of the affirmation he made in other proceedings in October 1990, and which is inconsistent with his present case. But to adopt what Godfrey J.A. said in his telling observation in Ng Shou Chun v. Hung Chun San [1994] 1 HKC 155 at p.15 8G, that argument goes to whether the Plaintiff's assertions are to be believed, and not to whether they are believable.

6. For these reasons, I grant the Plaintiff unconditional leave to defend the Defendant's counterclaim, and I shall hear from the parties as to costs and as to whether there are any directions I should give for the further conduct of the action.